Daily Market Update

Better Labor, Better Dollar, Fed comments at 10:15AM

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The U.S. Dollar had dropped overnight, but is currently re-gaining and establishing a surge against most counterparts because of a much better-than-expected Employment Situation.

Overview

Across the board, all figures signal positivity as even the Unemployment Rate going from 3.7% to 3.9% shows that people are going out there to apply for jobs because they feel they can attain one. Change in Non-Farm Payrolls came in at a stellar 312K exceeding the estimated 185K and Average Hourly earnings for the month went up 0.4% instead of just 0.3%.

It is possible that a good labor situation is priced into markets, but these numbers do help paint quite a contrast between the U.S. and the rest of the world’s economy. Market participants seemed to be in panic mode yesterday as Apple Inc.’s lower forecast and a combo of worrisome manufacturing gauges in Asia sank almost every asset.

Now with such domestic strength, it will be difficult for other currencies to find much that could dent the greenback’s value from what it’s been in the past six weeks. The most important thing to watch out for today is the 10:15AM AEA Conference’s speech by Fed head Jerome Powell and former leaders Ben Bernanke and Janet Yellen. Their words may have some impact.

What to Watch Today…

EUR

The Euro is not catching the break we expected as mixed economic data fails to help in lifting the currency. Inflation in the form of Producer Price Index (PPI) contracted for the month by (-0.3), while Consumer Price Index (CPI) increased by the forecast 1.0%. The yearly CPI average staying at 1.6% is still below the desired 2.0% by the European Central Bank and the 1.7% economists had predicted.

It is clear the region will need much better performance than this if the shared currency is to see a consistent appreciation at any point this year. We think things will improve, but not sure when, thought we would see a stronger start.

JPY

Swings for the Japanese Yen seem to be the 2019 Q1 theme with roller-coaster dips and highs across global markets. Improvement in the Chinese bond markets overnight and now the economic reality of the U.S. seeming resilient to slowdown fears per today’s data aided in Yen retreating from its recent highs.

On a quick note about our northern neighbor, oil prices improving and better job numbers helped Canadian Dollar have its best week since March. While a somewhat anemic economy and trade-pact concerns crushed the “loonie” in 2018, we think 2019 might be a return to much better levels as USMCA gets ratified and trade dynamics normalize.

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